Avon 2005 Annual Report Download - page 17

2005฀ANNUAL฀REPORT฀฀37
Debt and Contractual Financial Obligations and Commitments
At December 31, 2005, our debt and contractual financial obligations and commitments by due dates were as follows:
2011 and
2006 2007 2008 2009 2010 Beyond Total
Short-term debt (1) $ 877.6 $ – $ – $ – $ – $ – $ 877.6
Long-term debt (1) – 100.0 – 300.0 – 375.0 775.0
Capital lease obligations 4.9 3.6 3.5 .2 .1 – 12.3
Total debt 882.5 103.6 3.5 300.2 .1 375.0 1,664.9
Debt-related interest 30.5 25.8 21.7 21.5 – – 99.5
Total debt-related 913.0 129.4 25.2 321.7 .1 375.0 1,764.4
Operating leases 86.1 69.1 55.9 39.9 33.6 85.1 369.7
Purchase obligations 190.3 75.8 39.2 39.2 35.2 – 379.7
Benefit payments 107.9 109.5 113.1 118.4 119.3 598.0 1,166.2
Total debt and contractual financial
obligations and commitments (2) $ 1,297.3 $ 383.8 $ 233.4 $ 519.2 $ 188.2 $ 1,058.1 $ 3,680.0
(1) Amounts for debt do not include the $500.0 principal amount of notes payable issued in January 2006 (see Note 19, Subsequent Events).
(2) The amount of debt and contractual financial obligations and commitments excludes amounts due pursuant to derivative transactions. The table also excludes infor-
mation on recurring purchases of inventory as these purchase orders are non-binding, are generally consistent from year to year, and are short-term in nature.
See Note 4, Debt and Other Financing, and Note 12, Leases and Commitments, for further information on our debt and contractual financial
obligations and commitments. Additionally, as disclosed in Note 13, Restructuring Initiatives, we have a remaining liability of $29.2 associated
with the restructuring charges recorded during the fourth quarter of 2005, and we also expect to record additional restructuring expenses of
$3.8 during 2006 to implement the actions for which charges were recorded during the fourth quarter of 2005. The significant majority of
these liabilities will require cash payments during 2006.
Off Balance Sheet Arrangements
At December 31, 2005, we had no material off-balance-sheet
arrangements.
Capital Resources
Total debt at December 31, 2005 increased $731.0 to $1,649.0
from $918.0 at December 31, 2004, primarily due to commercial
paper borrowings (see Note 4, Debt and Other Financing).
As of December 31, 2005, we had a five-year, $600.0 revolving
credit and competitive advance facility (the “old credit facility”),
which was due to expire in May, 2006. On August 23, 2005, we
entered into credit agreements with Bank of America, N.A. and
Citibank, N.A., under which each bank provided a $200.0 revolving
credit facility (together the “bridge credit facilities”) which were
due to expire on August 22, 2006. At December 31, 2005, there
were no borrowings outstanding under the old credit facility or the
bridge credit facilities and we were in compliance with all covenants
under the old credit facility and bridge credit facilities. Following our
issuance, in January, 2006 of $500.0 of long-term bonds (see Note
19, Subsequent Events), the bridge credit facilities terminated in
accordance with their terms.
On January 13, 2006, we entered into a five-year $1,000.0
revolving credit and competitive advance facility (the “new credit
facility”), and simultaneously terminated the old credit facility. The
new credit facility may be used for general corporate purposes.
The interest rate on borrowings under the new credit facility is
based on LIBOR or on the higher of prime or ½% plus the federal
funds rate. The new credit facility contains covenants, which are
customary for financings of this type, including, among other
things, limits on the incurrence of liens and a minimum interest
coverage ratio. The new credit facility also provides for a possible
extension of the term by up to two years and possible increases by
up to an aggregate incremental principal amount of $250.0, sub-
ject to the consent of the affected lenders under the credit facility.
Net cash used by investing
activities in 2005 was $63.7
higher than in 2004 resulting
primarily from the 2005 pur-
chase of the Avon direct selling
business from our licensee
in Colombia for $154.0.